Before the pandemic, there were approximately 675,000 childcare providers around the country, mostly small businesses, who were already operating on thin margins. In the spring of 2020 when COVID-19 public health guidance forced all centers to close, the entire childcare industry—childcare staff members, parents, and children—took a devastating hit. And while many childcare providers have opened back up, it’s been anything but easy.
To paint a picture, childcare centers today are facing decreasing revenues due to lower enrollment, higher expenses to operate safely during the pandemic and severe and ongoing staffing difficulties. Almost two-thirds of childcare centers are serving less than 75 children and are struggling to break even.
This is unsustainable for many reasons. Childcare isn’t just a family issue, it’s a business issue. It affects how we all work when we can work and for many, why we work. Access to safe and reliable child care is the backbone of our economy and essential for employees to get back to work. The government has taken notice, and their answer is The Child Care Stabilization Grant, part of the American Rescue Plan Act (ARPA).
What is the New Child Care Stabilization Grant?
The American Rescue Plan Act (ARPA) Child Care Stabilization Grant, which some call the daycare grant, is a federal financial assistance program recently launched by the Office of Child Care to provide $24 billion of economic relief to child care programs impacted by the COVID-19 pandemic across the country.
There has never been this amount of federal funding dedicated to childcare providers, which makes this an incredible opportunity. If you’re a daycare or childcare provider, read on to find all of the important program details. We’ll answer:
- How much will my daycare get from the childcare stabilization grant?
- How do I get the childcare stabilization grant?
- American Rescue Plan Act (ARPA) Child Care Stabilization Grant requirements by state
- What dates matter for the child care stabilization grant?
- Why does the child care stabilization grant matter?
- Is the child care stabilization grant taxable?
- The best way to manage your child care stabilization grant funds
How much will my daycare get from the childcare stabilization grant?
One of the most common questions about this federal relief program is "how much is the grant?" Each state will receive anywhere from $39 million to $2.9 billion in funding from the grant to distribute as they see fit to eligible child-care providers. Some states have decided to be very lenient in how they distribute funds, some have a rigid set of regulations, and some have yet to decide how they’ll give out these funds.
See the funding breakdown by state, tribe, and territory, and more information about the grant on the White House American Rescue Plan Funding Fact Sheet.
How do I get the childcare stabilization grant?
- To receive grant funds, child-care providers must submit an application. Not all applications are guaranteed to be approved.
- Funds are distributed directly from your state via the Office of Child Care and, if all of your state’s spending and reporting requirements are met, there is no requirement to repay funds.
- Each state has its own guidelines—check your local government website to confirm:
- Who is eligible and how to apply for the grant.
- Grant funding amounts and distribution schedule.
- Stipulations for what the funds can be spent on and how to properly report them.
American Rescue Plan Act (ARPA) Child Care Stabilization Grant requirements by state:
Here are the government resources for the Child Care Stabilization Grant by state:
- Alabama: Alabama.gov
- Arizona: Azdhs.gov
- Arkansas: Arkansas.gov
- Colorado: Coloradoofficeofearlychildhood.com
- Connecticut: CT.gov
- District of Columbia: DC.gov
- Florida: MyFLFamilies.com
- Maine: Maine.gov
- Massachusetts: Mass.gov
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
What dates matter for the child care stabilization grant?
The Child Care Stabilization Grant is part of the American Rescue Plan Act (ARP Act) (Pub. Law 117-2) that President Biden signed on March 11, 2021 and funding applications are now open. The application process and distribution structure varies from state to state, so check your local government website to confirm application deadlines and important dates.
Why the child care stabilization grant matters
This grant signifies a powerful gesture of government support for families and businesses as the economy recovers. As we all know, parents need access to safe, quality child care to get back to work. But childcare providers have been really struggling to stay afloat, and many have resorted to taking on personal debt to get by or temporarily closing altogether. These funds give them a lifeline at the perfect time.
This program doesn’t just impact parents and childcare providers either. When childcare providers struggle, this creates a ripple effect in the economy when families can’t get childcare. 32% of employers have seen some of their employees leave the workforce due to the effects of COVID-19.
These funds will help early childhood and childcare providers keep their doors open and continue to provide these essential services that are critical for a strong economic recovery and a more equitable future.
Is the child care stabilization grant taxable?
The answer is yes, these funds are taxable. The IRS has published information indicating that “receipt of a government grant by a business is generally not excluded from the business’s gross income under the Federal Tax Code and therefore is taxable.” You must claim grant funds in your business’s gross income.
The best way to manage your childcare stabilization grant funds
- Have you applied for or received funds from this grant?
Compt can help.
Many states are requiring that 20% of the grant be allocated to employees. This presents an administrative challenge for using grant funds, because if you don’t do it correctly you may lose your funds.
Do you need help with:
- Managing funds earmarked for employee benefit programs?
- Distributing the funds to employees (most states require a portion of grant funds to be paid out to employees)?
- Adhering to your state’s unique spending and reporting requirements for funds that are part of the grant through the Office of Child Care?
- Ensuring proper tax compliance in the possible event of an audit?
- Creating a comprehensive family stipend program?
As an employee stipend software company that specializes in tax compliance, Compt can serve as your trusted guide to help administer the grant money in the form of an employee stipend, while staying fully compliant with federal tax law. Using a reimbursement model, management and reporting is easy and takes the burden off your HR team.
See how Compt can help you and your employees utilize these federal funds: Schedule a Demo: